Loss Mitigation

HUD and NeighborWorks have extended the deadline for homeowners who have experienced a loss of income to apply for the Emergency Homeowners' Loan Program (EHLP). The new deadline is Wednesday, July 27. The cut-off date had originally been set for Friday, July 22. EHLP assists homeowners who are at risk of foreclosure due to involuntary unemployment or underemployment as a result of the economy or a medical condition. Qualifying homeowners are awarded an interest free loan to pay a portion of their monthly mortgage for up to two years.

Treasury is currently reviewing a proposal to aid distressed homeowners by allowing a short sale of mortgage notes from mortgage-backed securities (MBS) trusts to new investors. The proposal was put forth by American Home Mortgage Servicing. The company says this strategy could be key to unlocking principal reduction modifications, which could save hundreds of thousands of homes from foreclosure and reduce losses for both investors and underwater borrowers.

Default rates on first and second mortgages dropped between May and June, and both measurements are down sharply from year-ago readings, according to S&P Indices and Experian. Their monthly assessment shows the default rate on first mortgages fell 7 basis points month-to-month and is 125 basis points below June 2010. Second-mortgage defaults slipped 2 and 101 basis points for the month and year, respectively. The results are based on consumer credit data from 11,500 banks and mortgage companies.

Chase has opened its newest Homeownership Center near the U.S. military base in Fort Hood, Texas, to provide one-on-one help for homeowners struggling with their mortgage payments. It is Chase's first Homeownership Center near a military base. The bank plans to open five other centers this year near military bases in Virginia, North Carolina, Tennessee, and Washington state.

MortgageKeeper Referral Services is the developer of a national database that connects financially strapped homeowners with qualified nonprofit and government agencies for assistance. The company announced Wednesday that it has entered into an agreement with Saxon Mortgage Services to electronically connect homeowners to vetted community services via MortgageKeeper's MKDirect product.

Wells Fargo says its second quarter expenses included $428 million of operating losses, substantially all driven by litigation accruals for mortgage foreclosure-related matters. Loan losses, though, were down substantially, supporting a 29 percent increase in net income to $3.9 billion for the three-month period. The company says credit quality continued to improve, marking its sixth consecutive quarter of declining loan losses and third consecutive quarter with fewer nonperforming assets.

A new California law bars junior lien holders from pursuing borrowers to collect outstanding loan balances after a short sale has been completed. Gov. Jerry Brown has signed SB 458 into law, which requires all lenders that agree to a short sale to accept the approved sale price as payment in full of the outstanding balance of all first and secondary mortgage loans. Local Realtors are hailing the new law as a victory for California homeowners and the state's distressed property market.

Bank of America says it is looking to downsize its mortgage servicing portfolio. Company executives told investors Tuesday that they will become more discriminating when adding mortgage servicing rights (MSRs) to their books and will be focused on selling off MSRs more aggressively. The company made roughly $70 million from MSR sales during the second quarter of this year, but on the whole posted its largest-ever three month loss - $8.8 billion - as a result of heavy losses within the consumer real estate services division.

For some borrowers, negative equity can become their rationale to stop making mortgage payments. The risk of such strategic default is rising among loans that have ""always performed,"" according to the credit analysts at Moody's Analytics. The agency found that these always-performing loans tend to be concentrated in robust housing markets that have held home values above the national average, but it's these areas where we may soon see a renewed increase in strategic defaults.

JPMorgan Chase kicked off the banking sector's second-quarter earnings season with a $5.4 billion profit. It was followed by Citigroup's announcement that it pulled in net income of $3.3 billion. Both beat market expectations, however, neither lender escaped mortgage-related losses - a trait that is likely to show up on balance sheets throughout the industry as banks continue to grapple with delinquencies and additional costs tied to foreclosure reviews and litigation.